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Africa Insights – Podcast Episode 1 – Winning Economies In Africa

Winning economies in Africa

With massive Chinese investment in Ethiopia helping power growth in the region, Deloitte’s Dr Martyn Davies discusses factors driving this and other African success stories.

Far East Africa?
With a decade of double-digit growth, only recently slipping to 8%, Ethiopia’s economy has grown 10-fold since 2000 and may soon overtake Kenya as East Africa’s largest economy. This is thanks Chinese investment, industrialisation and an aggressive approach to infrastructure development.

Rwanda, with growth rates of 8% a year for 14 years, is another bright spot in the African economic landscape. Also landlocked with no significant natural resources, Rwanda has emulated the Singapore economic model, even going to the extent of employing dozens of advisers from the Asian statelet.

Find the niche
In general, smaller African countries are not seen to be economically viable. Unless, of course, they are able to offer something compelling to investors. Rwanda is succeeding in this because it has an implementable vision and strong leadership. Ethiopia has made itself extremely attractive to Asian investors, both in manufacturing and infrastructure.

Services, please
We believe the region’s next challenge is to open its market for services. Until recently, Africa was seen as a consumer play, which explains why global FMCG giants have been so active across the continent.

It’s clear, however, that the next big opportunity in Africa is to provide services that governments would normally offer – education, health care and infrastructure. We see companies such as Curro and Netcare, which offer private education and health care, standing to benefit hugely from the growing need for these services across the continent.

Industrious thinking
I’ll soon be heading to Nigeria with the African Association of Automotive Manufacturing to explore opportunities to expand industry in the country. Just a few years ago, consumer companies would have dominated this kind of investment fact-finding mission. Now the industrialists are becoming more interested in Africa’s frontier economies.

Where does all the money go?
Foreign capital naturally flows to the larger more populated regional anchor economies – Kenya in East Africa, Ghana and Nigeria in West Africa, and South Africa in southern Africa. Kenya, despite recent political uncertainty, is attracting sizeable financial and technology investment, while Ethiopia is positioning itself as an alternative manufacturing destination for Asia.

What next?
The positive news is that recently we’ve had new presidents in South Africa, Zimbabwe and Angola. These changes are providing political tailwinds to the SADC region that may provide renewed impetus to regional growth and integration.  The last three or four years have been challenging but we now see green shoots and with it a more progressive image is being presented – it is about time.

Dr Martyn Davies currently holds the position of Managing Director of Emerging Markets & Africa at Deloitte and also leads the Japan Services Group for Deloitte Africa. He is a member of the Global Firm’s Insight Advisory Group as well as the Deloitte Economics team. Previously, Dr Davies has been ranked as the number one analyst in South Africa in the “African Economies & Markets” category, a title that was awarded by the Financial Mail in its Annual Analysts of the Year awards.

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